Livesay joined HealthSouth's accounting department in April 1989 as the assistant controller. In 1999, after at least four years of knowingly making false entries in the company's books and records, he expressed his discomfort to members of the executive "family", who allowed him to leave the accounting department and take on the position of chief information officer.
On April 4, 2003 Livesay pleaded guilty to one count of conspiracy to commit wire fraud, one count of securities fraud and one count of willfully and knowingly falsifying books and records of HealthSouth. He assisted government investigators and prosecutors in reconstructing HealthSouth's balance sheets and provided documents used as evidence. In 2004 District Court judge U. W. Clemon considered the prosecuting attorney's request for a five-year prison sentence, but instead fined Livesay $10,000, sentenced him to 5 years of probation and required him to forfeit $750,000. Prosecutors appealed the sentence and won on appeal before the 11th Circuit which found "scant basis to assess" the reasonableness of Clemon's sentence. After Clemon reinstated the same sentence, it was again appealed and the Circuit Court this time found the sentence unreasonable and ordered Clemon to resentence him. The process was repeated once more and the Circuit Court's decision was affirmed by the U. S. Supreme Court. The Circuit Court added in its latest remand in 2009 that only a "meaningful term of imprisonment" would satisfy its requirement for a reasonable sentence. On February 16, 2010 Judge Karon Bowdre handed down a new sentence of 5 months imprisonment.
In HealthSouth CEO Richard Scrushy's 2005 accounting fraud trial, Livesay testified that Scrushy was aware of and in control of the company's accounting fraud. He also testified about his participation in creating Computer Help for Kids and his concerns about the validity of the organization which led him to resign from its board of directors. Scrushy's attorneys argued that the other executives conspired to keep Scrushy in the dark about the scheme and he was acquitted.
- "5 HealthSouth Officers Plead Guilty to Conspiracy." (April 4, 2003) New York Times
- Morrissey, John (April 2003) "Distancing himself; HealthSouth CIO sought to escape scheme." Modern Healthcare
- Whitmire, Kyle (November 1, 2007) "FBI probes Langford-linked charity." Birmingham Weekly
- "11th federal Court of Appeals: Former HealthSouth exec Ken Livesay needs more punishment." (November 16, 2009) Associated Press
- Gordon, Robert K. (February 16, 2010) "Former HealthSouth executive sentenced to five months in prison." Birmingham News